The European Commission has decided that Électricité de France (EDF), the main electricity provider in France, has been granted tax breaks incompatible with EU rules on State aid. In 1997 France did not levy all the corporation tax payable by EDF when certain accounting provisions were reclassified as capital. This tax exemption conferred on EDF an undue economic advantage compared with other operators on the market and so distorted competition. In order to remedy this distortion, EDF must now repay that aid. The Commission reopened its investigation in 2013 following annulment of an earlier decision by the EU Court of Justice...
Margrethe Vestager, the Commissioner responsible for competition policy, commented: ‘Whether private or public, large or small, any undertaking operating in the Single Market must pay its fair share of corporation tax. The Commission’s investigation confirmed that EDF received an individual, unjustified tax exemption which gave it an advantage to the detriment of its competitors, in breach of EU State aid rules.’
As EDF was awarded the high-voltage transmission network in France as a concession, between 1987 and 1996 it made accounting provisions with a view to renewing the network. In 1997, when EDF’s balance sheet was restructured, the French authorities reclassified some of these provisions as a capital injection without levying corporation tax.
As EDF was awarded the high-voltage transmission network in France as a concession, between 1987 and 1996 it made accounting provisions with a view to renewing the network. In 1997, when EDF’s balance sheet was restructured, the French authorities reclassified some of these provisions as a capital injection without levying corporation tax.
The Commission reopened the investigation in 2013 to verify, in accordance with the criteria laid down by the European Courts, whether France's tax revenue loss was economically justified from the point of view of a private investor in relation to EDF in similar circumstances. The Commission has now concluded that it was not, in particular because at the time the profitability that could reasonably be expected of such an investment was too low. It follows that the tax exemption granted to EDF cannot be considered an investment made on economic grounds.It is therefore State aid that has strengthened EDF's position to the detriment of its competitors, without furthering any objective of common interest. The aid is therefore incompatible with the single market and EDF must repay it to the French state. The amount in question is some €1.37 billion, of which €889 million is a tax exemption granted in 1997 and €488 million is interest (the exact amount will be calculated in cooperation with the French authorities).
